The Income Tax Appellate Tribunal ( ITAT ), Delhi bench has held that the claim for business expenditure cannot be allowed because the items distributed are more of a personalized in nature.
The assessee-company is engaged in the business of manufacturing of automobile parts. During the relevant assessment year, the Assessing Officer disallowed Rs.2,06,254/- being 10% of sale promotion expenses by finding that the assessee had claimed expenditure on account of purchase of diamond and gold jewellery.
The assessee claimed that these expenses were incurred for business promotion to various customers. However, the claim was rejected.
After hearing both the parties, the Tribunal found that “though assessee has given the list of the item distributed to various customers, however, nowhere it is borne out from the records as to whether distribution of gold and diamond ring and chains were part of the sales promotion activities. Neither any pamphlet of any scheme of sales promotion has been filed nor has any business purpose been shown specifically when the items distributed are more of a personalized in nature. In absence of any proper evidence to demonstrate that these items were actually used for business purpose, we hold that Assessing Officer was far more reasonable in disallowing only 10% of the said expenditure. Accordingly, ground raised by the assessee on this score is dismissed.”
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